Mazor'sEdge – Page 203 – News and analysis on Berkshire Hathaway

Berkshire Acquires Medical Liability Mutual Insurance Company

Post author By David Mazor
Post date July 20, 2016

(BRK.A), (BRK.B)

If there is one thing Warren Buffett likes more than anything else it’s probably insurance float, and Berkshire Hathaway just acquired billions more of it.

Berkshire has announced that Medical Liability Mutual Insurance Company (“MLMIC”), the largest underwriter of medical professional liability insurance in New York, has entered into a definitive agreement, pending regulatory and policyholder approval, to be acquired by Berkshire’s National Indemnity Company, following the completion of the conversion of MLMIC to a stock company from a mutual company.

National Indemnity Company is a subsidiary of Berkshire Hathaway Inc., one of the world’s leading insurance organizations.

The transaction is expected to close in the third quarter of 2017, subject to customary closing conditions and regulatory approvals.

“Good things are worth waiting for,” said Berkshire Hathaway CEO Warren Buffett. “MLMIC is a gem of a company that has protected New York’s physicians, mid-level providers, hospitals and dentists like no other for over 40 years. We welcome the chance to add them to the Berkshire Hathaway family and enhance their capacity to serve these and other policyholders for many years to come.”

“We are delighted to partner with such a fine organization. MLMIC has always had strong standing and stability within the challenging New York insurance market, and the arrangement with Berkshire Hathaway will bring policyholders further peace of mind, knowing MLMIC will be able to offer an even higher level of financial security. In addition, MLMIC will be able to expand its offerings, with more customized policy limits, risk-sharing features and services to groups, facilities and other large accounts,” said MLMIC President Robert Menotti, MD.

In a letter to policyholders, Menotti said, “Berkshire Hathaway values our operations, board, staff and endorsed partners. Most importantly, Berkshire Hathaway is committed to MLMIC’s future success and its ongoing dedication to serving policyholders.”

More Float for Berkshire

As of Dec. 31, 2015, MLMIC had a policyholder surplus of $1.8 billion giving Berkshire more of the insurance float that has played a key part in the conglomerate’s growth.

Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell the stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.

Tags Insurance

Acquisitions Berkshire Hathaway Energy

PUC Disapproval of NextEra’s Hawaiian Electric Bid Opens Door for Berkshire

Post author By David Mazor
Post date July 19, 2016

(BRK.A), (BRK.B)

The Hawaii Public Utilities Commission (PUC) has denied NextEra Energy’s bid to acquire Hawaiian Electric Company, the Honolulu-based utility that provides power to all of Hawaii. The denial of NextEra’s application opens the door for a bid by Berkshire Hathaway Energy.

In a statement the PUC said that “…the Commission concluded that while the Applicants demonstrated that NextEra is fit, willing, and able to perform the services currently offered by the HECO Companies, the Applicants failed to demonstrate that the Application is reasonable and in the public interest. In reaching this conclusion, the Commission focused on five fundamental areas of concern: (1) benefits to ratepayers; (2) risks to ratepayers; (3) Applicants’ clean energy commitments; (4) the proposed Change of Control’s effect on local governance; and (5) the proposed Change of Control’s effect on competition in local energy markets.”

The denial came just weeks after Governor David Ige, who had opposed the merger, and has openly questioned NextEra Energy’s commitment to Hawaii’s goal of 100% renewable energy, appointed a new PUC Commissioner.

Renewable Energy? Berkshire’s a Believer

Berkshire Hathaway not only believes in renewable energy, it already has one of the largest renewable energy portfolios in the world. Its subsidiary BHE Renewables encompasses BHE Solar, BHE Wind, BHE Geothermal, BHE Hydro as well as renewable project development and commercial management. BHE Renewables owns solar, wind, geothermal and hydroelectric projects in eight states that produce energy for both the wholesale market and for customers under long-term power agreements.

The company already has 3,877 megawatts of renewable energy capacity, including one of the world’s largest solar farms, the 579 MW Solar Star project in southern California.

Another example of Berkshire’s commitment to renewable energy is in Iowa, where it is aggressively working towards producing 100% of the state’s energy needs through wind power.

In April, Berkshire’s MidAmerican Energy Company announced plans for a $3.6 billion, 2,000 megawatt wind farm in Iowa that will feature 1,000 wind turbines.

Berkshire’s Interest in Hawaiian Electric

Berkshire already has an energy asset in Hawaii. It owns BHE Hydro’s Wailuku run-of-river 10 megawatt hydro project in Hawaii. The hydroelectric project consists of a massive 60-inch pipeline located 2,000 feet above sea level that carries water nearly three miles, transporting it from the Wailuku River diversion all the way to the powerhouse.

In addition, Berkshire recently registered MidAmerican Energy Services LLC as a new business in Hawaii.

There are still plenty of hurdles for Berkshire to overcome before it can acquire Hawaiian Electric, including local opposition that fears outside ownership will lead to higher rates, but it just got a big step closer.

Tags Berkshire Hathaway Energy

Acquisitions Berkshire Hathaway Energy

Berkshire Hathaway Energy Bidding for Oncor

Post author By David Mazor
Post date July 18, 2016

(BRK.A), (BRK.B)

Berkshire Hathaway Energy has been confirmed as one of two energy companies bidding for Oncor Electric Delivery Company, a regulated electric transmission and distribution service provider that serves 10 million customers across Texas.

Oncor has been in and out of auction ever since the April 2014 bankruptcy of its biggest shareholder, Energy Future Holdings. The company went under after being burdened with $40 billion in debt from a 2007 leveraged buyout.

NextEra Energy Inc. also has made an offer to acquire Oncor, and is considered one of the other competitors likely to take home the prize.

A Texas-Sized Asset

Oncor is a quite a prize. The company has the largest distribution and transmission system in Texas; with approximately 119,000 miles of lines and more than 3 million meters across the state.

The End of a Long Waiting Game

After originally pushing back the auction of Oncor from November 2014 to March 2015, it looked like no auction would ever happen. Instead, the creditors in the holding companies Energy Future Intermediate Holdings and Energy Future Holdings were expected to take ownership of Oncor.

Then, in September 2015, U.S. Bankruptcy Judge Christopher Sontchi agreed to a plan by Hunt Consolidated that would have allowed the company to take ownership with Oncor’s current management remaining in place.

The deal eventually fell apart when Hunt Consolidated didn’t like the terms set by the Public Utility Commission of Texas.

Energy Transmission is Great ROE

Back in June 2014, Warren Buffett proclaimed he was ready to put at least $15 billion into energy generation and transmission assets, and at that time Oncor, with a value of roughly $17.5 billion looked like a good fit.

Transmission lines have been high on Berkshire Hathaway Energy’s wish list of late because they are a great way to put Berkshire’s huge insurance float to work for a high return with very low risk.

The AltaLink Example

In April 2014, BHE made a $2.9 billion purchase of Canadian company AltaLink from SNC-Lavalin Group Inc. The acquisition got the company the transmission lines for Calgary, Alberta, and gives it an 8.75-percent after-tax return on equity, with consumers picking up 100-percent of the tab for any new transmission lines.

Like AltaLink, the acquisition of Oncor would be a perfect fit for Berkshire Hathaway Energy, which currently has $70 billion in assets, including one of the largest portfolios of renewable energy in the world.

Tags AltaLink, Berkshire Hathaway Energy

Uncategorized

Lubrizol Acquires Diamond Dispersions Ltd.

Post author By David Mazor
Post date July 15, 2016

(BRK.A), (BRK.B)

The Lubrizol Corporation has acquired Diamond Dispersions Ltd., a company exclusively focused on the production of water-based dye and pigment dispersions for inks used in digital printing.

Headquartered in Sheffield, UK, Diamond Dispersions has established itself as a high quality, responsive and innovative producer of dispersions, gaining a significant share in this growing niche market.

Lubrizol notes that Diamond Dispersions will advance Lubrizol Performance Coatings’ goal to grow its portfolio of products that enable digital printing.

According to Sanjay Kalhan, general manager of Lubrizol Performance Coatings, “The combined technologies, knowledge and expertise of both companies will drive further innovation across product lines and position Lubrizol as the preferred partner for ink makers seeking to develop new digital print systems for this growing market. In addition to our dispersant, specialty additive and resin product lines, ink manufacturers will now have the opportunity to source fully formulated dispersions through Lubrizol.”

Diamond Dispersions is now part of Lubrizol Advanced Materials, reporting into Lubrizol’s Performance Coatings business.

The transaction includes all intellectual property, trademarks and customer lists of Diamond Dispersions. Financial terms of the agreement were not disclosed.

Tags Lubrizol

Minority Stock Positions Stock Portfolio

BYD’s CEO Touts Dramatic Growth of Electric Vehicles in China

Post author By David Mazor
Post date July 14, 2016

(BRK.A), (BRK.B)

The electric vehicle in China is on a quick path to move from a rarity to a substantial part of the transportation mix.

In a speech given at the World Economic Forum’s Annual Meeting of New Champions 2016 in the city of Tianjin, China, BYD’s CEO Wang Chuanfu stated that “the turning point for new energy vehicles has finally arrived.”

Wang noted that the production and sales of new energy vehicles exceeded 300,000 units in 2015, representing a three-fold growth year-on-year, and accounting for a 1.3% share of overall vehicle sales in China.

He pointed out that it took ten years to go from zero to the current 1%, but it may take only another five years to reach 10%.

Sales of new energy vehicles in China are projected to move up dramatically and are forecast to hit 30% by 2025.

In 2015, BYD became the number one seller of electric cars in the world. It was a dramatic rise for a company that only ranked seventh in 2014.

In April 2016, BYD achieved another major milestone, the production of its 10,000th pure electric bus.

BYD is thoroughly dominating the rapidly growing market for emissions free buses of all sizes.

BYD and Berkshire Hathaway

In 2008, Berkshire Hathaway bet on BYD’s potential, purchasing 225 million shares, and today owns roughly 9.1% of the company.

It’s an investment that has paid off handsomely. Berkshire’s original investment of $230 million is now worth roughly $1.77 billion.

For More on BYD, read the Special Report: BYD, Berkshire’s Tesla.

Tags BYD Co, Stock Portfolio

Dairy Queen

Dairy Queen Returns to Knoxville, Tennessee

Post author By David Mazor
Post date July 13, 2016

(BRK.A), (BRK.B)

Dairy Queen is bringing its Grill & Chill restaurants back to Knoxville, Tennessee.

Local franchisee Fourteen Foods is planning a DQ Grill & Chill in the former Farragut Krispy Kreme store that was located at 11208 Kingston Pike.

Currently, there are two new Dairy Queen stores under construction in the east Tennessee towns of Seymour and Morristown.

Fourteen Foods is a multi-unit owner and operator of 176 DQ Grill & Chill restaurants and Dairy Queen Braziers in Alabama, Florida, Indiana, Iowa, Kentucky, Minnesota, Nebraska, South Dakota, Tennessee, and Wisconsin.

Tags Dairy Queen

Lubrizol

Lubrizol to Benefit from Growth of Smart Coating Market

Post author By David Mazor
Post date July 12, 2016

(BRK.A), (BRK.B)

A new report by Research and Markets, “Smart Coatings Markets 2016-2025,” highlights the growth prospects of smart coatings made by companies such as Berkshire Hathaway’s Lubrizol Corporation.

The report suggests that smart coatings have reached a stage of technological maturity where they can replace traditional anti-corrosion, anti-icing, anti-fouling, and other industrial protective coatings. These smart protective coatings will reach approximately $2 billion in sales by 2021, based on their ability reduce downtime and maintenance costs for vehicles, marine vessels, buildings and large pieces of industrial machinery.

The research also sees a new opportunity opening up for smart coatings in the consumer sector, where sales of these coatings to consumer electronics, furniture, textiles, etc., will be worth around $1 billion by 2021. Low-end self-cleaning and self-healing sprays have been available to the consumer market for many years. But durable smart consumer coatings are now reaching price points that will make them attractive to high-income consumer markets with strong use cases that can compete with anti-scratch coatings and other polishes.

In addition, the research sees the smart coatings business finding new commercial directions through the use of the latest nanomaterials and notes that developing smart coatings has become one focus for firms developing applications for carbon nanotubes and graphene.

Berkshire Hathaway and Lubrizol

Founded in 1928, and acquired by Berkshire Hathaway in 2011, the Lubrizol Corporation is a leading supplier to manufacturers in various industries, including paints and coatings, printing inks, plastics, engineered paper, textiles and packaging.

Lubrizol’s Performance Coating division focusses on surface coating innovation. Solsperse®, Lanco™ and Hycar® are well-known Lubrizol trade names within the Performance Coatings product line.

Tags Lubrizol

Minority Stock Positions Stock Portfolio

BYD Enters Monorail Business

Post author By David Mazor
Post date July 11, 2016

(BRK.A), (BRK.B)

While Elon Musk touts the future prospects of hyperloops in dealing with future transportation needs, Chinese competitor BYD Co. LTD. is looking towards an existing mass transit technology, the monorail, as part of its answer to urban congestion issues.

According to BYD’s CEO Wang Chuanfu, the BYD’s green mobility platform is not just about cars; the company also plans to promote the implementation of what it calls “three-dimensional green traffic,” and is expanding its reach by entering the monorail industry.

Dramatic Cost Savings Compared to Subways

The electric monorail is a kind of traffic network which interconnects multiple transit backbones in the city at one sixth of the cost of a subway system.

According to Wang, the total market for monorails just in China are in the range of 3 trillion yuan ($450 billion).

BYD is unveiling its first electric monorail with a 4.4 kilometer line at its Shenzhen Headquarters as of September 2016.

The goal is to alleviate the traffic problems of 50,000 factory and management employees.

BYD and Berkshire Hathaway

In 2008, Berkshire Hathaway bet on BYD’s potential, purchasing 225 million shares, and today owns roughly 9.1% of the company.

It’s an investment that has paid off handsomely. Berkshire’s original investment of $230 million is now worth roughly $1.77 billion.

For More on BYD, read the Special Report: BYD, Berkshire’s Tesla.

Tags BYD Co, Stock Portfolio

Acquisitions Richline Group

Richline Group Makes Third Acquisition This Year

Post author By David Mazor
Post date July 8, 2016

(BRK.A), (BRK.B)

One of the most active of Berkshire Hathaway’s companies this year in regards to acquisitions is one of its lesser known. The Richline Group, a fine jewelry manufacturer and marketer, has acquired its third company in the last three months.

Richline has announced the acquisition of Viawear, an innovative wearables provider for jewelry brands.

In April, Richline acquired Gemvara, a leading online provider of customizable fine jewelry, In June, Richline announced the acquisition of John C. Nordt, a leading manufacturer and supplier of precious metal products to the jewelry industry.

The acquisition of Viawear continues Richline’s focus on wearable tech, which included launching the Wearable Style News Website, and partnering with Omate on the distribution of Omate’s Ungaro smart ring.

“The world has embraced wearables, and we intend to provide our customers with the right jewelry products that blend seamlessly with the latest technology. Viawear’s technology and designs compliment everything we’ve set out to achieve in the smart jewelry space,” said Joel Schechter of the Richline Group.

According to Richline, Viawear has developed a unique approach to filtering mobile notifications and delivering the most contextual wearable alerts. With Viawear, wearers can stay connected to their most important alerts, and eliminate the need to constantly checking to see if they missed something important.

“Our objective has always been to develop smart accessories that truly complements our wearer’s lifestyle. Blending Richline’s tremendous jewelry acumen with Viawear’s technology platform allows us to make this vision into a reality that can help drive the world of fine jewelry into the world of wearable technology,” said Ben Isaacson, Founder and CEO of Viawear.

Bolt-On Acquisitions Continue to Power Berkshire’s Growth

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Tags Richline Group

Insurance

Gen Re Acquires Mortality Assessment Technology and Synthesis Analysis Patent License

Post author By David Mazor
Post date July 7, 2016

(BRK.A), (BRK.B)

Gen Re, the Berkshire Hathaway-owned global life/health reinsurer, has acquired from BioSignia the Mortality Assessment Technology (MAT) and an exclusive worldwide license for “Synthesis Analysis,” a patented statistical methodology to build prediction models. By obtaining this cutting-edge technology, Gen Re seeks to deliver highly competitive reinsurance programs for the life and health insurance markets.

MAT has been available to the individual life insurance market since 2011 and has been used by carriers to support their underwriting processes. Within the reinsurance market these technologies will be first of their kind offerings.

Gen Re’s Vice President, Chief of Decision Analytics, Guizhou Hu, M.D., Ph.D., developed MAT and was the inventor of “Synthesis Analysis” in his prior role at BioSignia. He forecasts exciting possibilities for using these proprietary tools in the life and health insurance markets. “Using the unique statistical approach – Synthesis Analysis – MAT serves to better differentiate an individual’s mortality and more confidently classify the customer’s risk profile,” says Hu.

“Our aim is to improve the profitability of our client’s business,” says Gen Re’s James Greenwood, Senior Vice President, Individual Products. “Gen Re has been long respected in the industry for our innovations in underwriting substandard and elderly risks and recently has focused much of our decision analytics work in developing our new facultative programs – PURFac and Second Look. MAT will further improve our offerings and help our customers become more competitive in the market through increased placement rates.”

Tags Insurance